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Real Healthcare ‘Consumerism’ Begins with Legitimate Transparency

Almost without exception, price transparency in non-medical-related products and services work extraordinarily well in our consumer markets. When price is coupled with quality metrics and easily available for public scrutiny, consumers ultimately determine which products will become successful.

The exception? Healthcare.
But healthcare is changing, albeit very slowly.  Just last week, the Centers for Medicare and Medicaid Services (CMS) issued a final rule that hospitals will be required to post online a list of their standard charges beginning January 1, 2019. Currently, hospitals are required to make this type of information public only when requested. This new, finalized rule requires hospitals to proactively post the information online to “encourage price transparency” and improve “public accessibility.” Additionally, hospitals much update this information annually.

Pricing – Designed to Protect the Sellers of Care

In healthcare, price transparency is similar to a unicorn. We all hear about it, but have yet to actually see (or experience) it in person. I fully understand that we have healthcare pricing tools provided to the public by third-parties that include, but not limited to, insurance companies, a smattering of medical providers, and crafty entrepreneurs who desire to crack the codes of using historical paid claims to determine ‘approximate’ prices within certain marketplaces. To date, price transparency tools for medical services have only nudged a small number of patients to actually use them, according to a new study funded by the NIHCM Foundation, “Consumer Responses to Price Transparency Alone Versus Price Transparency Combined with Reference Pricing.”

Imagine purchasing consumer products, such as groceries, a bicycle or car, and being told by the grocery store or dealership that you will eventually know the cost of that product sometime AFTER the purchase has been made, but NOT before. This scenario is the current state of our medical pricing – we are given approximations prior to the elective care we receive. But because the services have yet to be rendered, opaque pricing is masqueraded as being at least somewhat transparent with ‘approximate’ pricing.

After Medicare and Medicaid impose reimbursement terms on most medical providers, the payment pecking order continues. Insurance companies with the largest number of insureds in a given geographical area will likely receive better payment terms compared to carriers in the same market with fewer insureds. Terms of pricing details are carefully guarded. In fact, depending on the circumstances, favorable pricing terms are considered to be a ‘competitive advantage’ for dominant insurance companies and medical providers, and it is in their best interest that pricing terms be deliberately withheld from the public. Clearly opaque pricing is the modus operandi in healthcare. The magician that can somehow cleverly demonstrate this level of ‘deep pricing magic’ on the popular television show, “America’s Got Talent,” could possibly win the $1 million prize.

Transparent pricing empowers the buyer, while opaque pricing protects the seller. This is the crux of what is happening in healthcare.

As we continue to ‘break the code’ on transparent pricing, we must also focus on the other decision-making tools desired by consumers – quality. In healthcare, appropriateness of care is a quality component, but so too are the outcomes that result from care. Better outcomes in care should parlay to higher quality, right? Receiving safe care should also be a qualifying factor when determining quality of care.

IOWA Health Scores

Recently, a new website went live for Iowans that compares about 50 Iowa hospitals that encompass over 90 percent of hospital claims incurred by Iowa employer plans. The tool, IOWA Health Scores, is developed and sponsored by the Iowa Employer Group, “a coalition of employers and other purchasers that develop joint initiatives to improve quality and affordability of healthcare in Iowa.” Paul Pietzsch is President of Health Policy Corporation of Iowa, the organization that coordinates the activity of the Iowa Employer Group.

According to Mr. Pietzsch, the IOWA Health Scores website is “dedicated to providing the best comparative tools available for Iowans choosing healthcare. For now, that includes only hospitals – and a selected range of quality/patient safety ratings and metrics – but will be expanded over time. This site is intended to be used as a guide and assist consumers asking questions about care for them and their families.”

Is this website perfect? No, but as Voltaire was attributed as saying, “Perfect is the enemy of good.” Pietzsch himself will acknowledge this is merely the first iteration of a long-term goal of selecting measures from reliable sources – national in scope – that are simple for the average Iowa consumer to use when seeking care. The site currently uses the following primary sources to make hospital comparisons:

  1. Quality Measures – CMS Hospital Compare
  2. Patient Safety – Leapfrog Hospital Safety Grade
  3. Patient Experience – CMS Five Star Rating of Patient Experience

Specific measurements used within this website include:

  • Rate of readmission for heart-failure patients
  • Rate of complications from hip/knee replacement
  • Patients who developed blood clots while in hospitals who did not receive appropriate treatment that would prevent it
  • Surgical site infections from colon surgery
  • Average (median) time that patients had to wait before receiving pain medication after arriving to the emergency department with broken bones.

Finding quality-of-care sources online takes time, and frankly, a good dose of trust that this information is not misleading. The Iowa Employer Group has accessed a handful of national measurements from two well-known sources (CMS Compare and Leapfrog) to enable Iowans to compare up to three hospitals on selected quality metrics. The Iowa Employer Group encourages Iowa employers to add this website link to their webpage so that employees and family members can compare Iowa hospitals on different measures.

Check out this website then prepare your next grocery list!

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Using the IRS to Tame Healthcare Costs

As I approach the eve of receiving results from our 19th annual Iowa Employer Benefits Study©, a survey that was on sabbatical in 2017 to accommodate our Iowa Patient Safety Study©, I am waiting in great anticipation as to the status of employer benefits in Iowa after this one-year hiatus.

From this latest study, we will be learning quite a bit regarding many key components found in health and dental insurance, life and disability coverages, retirement, and a multitude of paid-time off components that are extremely important to employees.

But as in previous studies, I will be highly focused on health insurance components, such as premiums, employee contributions and out-of-pockets expenditures. As we are all painfully aware, the cost of health insurance, although experiencing relative tepid growth in the past few years, continues to outpace inflationary costs. In May, the Milliman Medical Index was released showing that, on a national average for 2018, the total cost of insurance for a family of four exceeded $28,000 (it was $23,215 in 2014). As we know, the rising cost of health insurance and medical care alters purchasing behaviors – rational or not.

A recent commentary written in the Wall Street Journal, “The IRS Can Save American Health Care,” by Regina Herzlinger (professor at Harvard Business School) and Joel Klein (chief policy and strategy office at Oscar Health) piqued my interest. Now it must be noted that Dr. Herzlinger is a huge proponent of “consumer-driven healthcare,” while Oscar Health is a technology-focused health insurance company that primarily focuses on individuals purchasing health coverage through designated state marketplaces. Oscar would presumably benefit greatly from what these authors have proposed.

The Existing Problem

Thanks to a 2017 Kaiser Family Foundation report, the authors make a point that eight percent of employers offer a choice of tighter provider networks for their employees to use. Tighter networks restrict the number of providers that can be covered in a geographical location, but in return, providers concede on price, making the plans’ cost more competitive. By abdicating the important choice to exclude higher-cost providers, the authors argue that large hospitals that are dominant in local markets are able to charge higher prices without facing much backlash.

Employers benefit from using pretax dollars when they purchase insurance on behalf of employees, who understandably, are unsure about the true cost of health insurance as this tax exemption greatly distorts and conceals this cost. As a result, employees are likely to believe that someone else is paying the majority of the cost and may not feel as compelled to discern the charges they rack up. If employees work for employers who don’t offer health insurance, they can buy policies on their own through the individual markets, however, they will not benefit from the same tax breaks allowed to employers.

According to the authors, it is who pays for the coverage that ultimately impacts healthcare costs.

Proposed Approach to Put Employees in Charge of Health Costs

Herzlinger and Klein are advocating the IRS to adjust its technical definition of Health Reimbursement Arrangements (HRAs) so that they can be used to pay insurance premiums to satisfy the ObamaCare employer mandate. How could this happen? Employers would simply fund a fixed amount of money into each employees’ HRA, and then have the employee buy the best health plan for their families in ACA-exchanges. Employees would now have tax-free money to purchase health insurance, and if any money is left after the purchase, they can pocket the savings as taxable income. This provides an economic incentive to employees to become thrifty with their money.

The thought process is that employees would now have the appropriate tax break to induce buying cheaper, more-tailored policies – rather than receive a standard plan offered by their employer. The theory is that having more workers purchase coverage through the individual marketplaces would “drive down premiums.” Workers may be more inclined to select a scaled-down provider network that would have fewer providers, but in return, the insurer would be empowered to negotiate lower prices with hospitals and physicians. Such activity would eventually break the stronghold that dominant health providers have in their markets. A 2017 McKinsey analysis suggests that tighter provider networks can be at least 18 percent cheaper (and still achieve similar outcomes).

With this IRS adjustment, the authors feel the Department of Health and Human Services – and Treasury – could work with states and employers on offering HRAs to employees. There would be no act required by Congress to make this happen, bypassing the common gridlock found in Washington.

Will This Be Successful?

This approach is simple in concept and may have some merit of pushing workers to become better healthcare ‘consumers.’ However, expecting a new insurance approach – even through different tax advantages – to overcome the myriad of twisted, inefficient, and opaque incentives that mold how providers and other stakeholders behave is, I’m afraid, mere wishful thinking.

I do consider myself to be an advocate of ‘market-driven’ forces to make healthcare more efficient, safe and affordable, however, it will take a carefully-crafted menagerie of both public-private approaches to ‘tame’ this beast and eventually alleviate runaway health costs.

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A Man with an Impactful Reach

Thenh Bo Bong – Circa 1977 Courtesy of Centerville Greenhouses, Inc.

With the recent passing of Iowa’s uber-popular Governor Robert D. Ray, I am reminded of his influence on our family four decades ago while growing up in Centerville. This impact was in the form of becoming educated about life outside of Iowa…and our country.

Growing up in a small Iowa town can have both positive and not-so-positive vibes…much of which relates to how we personally perceive whether we can have an impact on the community where we live, work and play. In 1972, after my parents purchased a greenhouse in southern Iowa, our family moved to Centerville from Fargo, ND. Some of my best memories come from those initial years of helping make the greenhouse a growing concern. It took a lot of hard work to transform a run-down, badly neglected facility into something we would be extremely proud of – and depend on for our livelihood.

Governor Ray, elected in 1968, was up for his first re-election the year we moved to Iowa. Given my age at the time, I knew very little about him, other than through newspapers articles or radio and television. I now have the luxury of knowing more about Gov. Ray and his policies, understanding that even though he was a fiscally-responsible Republican, he also embodied a progressive agenda that crossed party lines.

But he was more than that. Gov. Ray demonstrated a humanitarian response by accepting several thousand displaced refugees from Southeast Asia – a result from the horrible aftermath of the Vietnam war. The concern back then for some Iowans and Americans was that the refugees would take away ‘our’ jobs. Gov. Ray persisted, however, telling The Iowa City Press-Citizen in 2003, “I decided we couldn’t sit here in the middle of Iowa, in the land of plenty, and let them die…They had to risk everything, their homes and members of their family.”

New Arrival in Centerville

Around 1976, Gov. Ray’s compassionate action spilled over to Centerville – and to our family business. Through their own compassion, my parents felt it was their civic and moral obligation to reach out to a newly-arrived family from Laos, who spoke little-to-no English but desired to quickly assimilate into a new location and culture. As teenagers in rural Iowa, my siblings and I now had ringside seats to observe how refugees could reconstruct a new life of hopeful opportunity after having experienced tragic circumstances that occurred halfway around the globe. There are no social studies classes or textbooks that could be written to describe what we experienced working with this newly-hired employee – a tiny man in his forties with a wife and three children. His name was Thenh Bo Bong.

Thenh Bo Bong: Courtesy of the Centerville Iowegian 1980 Progress Edition

Although Thenh Bo spoke no English, his sons would act as his early interpreters. Over time, he would intently listen and watch his co-workers and quickly grasped the various jobs that needed to be performed at the greenhouse. I specifically remember that, despite the hot and humid summer months, he enjoyed having hot tea or water during our sanctioned morning and afternoon breaks. Though very quiet, primarily due to not speaking English, he always had an infectious smile and was very courteous to others – the language barrier could easily be replaced through other means. From this, I learned that effective communication can come in many forms, one of which, of course, is the spoken language. But the universal language, regardless of culture, is more easily demonstrated through our actions toward one another. Learning this invaluable lesson came from on-the-job training with our newest employee.

During the winter months, my sister, Mary, would pick up Thenh Bo (along with his two sons) at his home and deliver the sons to the junior high before taking Thenh Bo to the greenhouse. Mary herself, would then proceed to high school. Our parents sponsored Thenh Bo’s parents when relocating to Centerville, and also helped furnish their apartment with bedding, curtains and various other items. The tapestry of cultures, no matter how different, impacted many lives in this small town.

During his employment at the greenhouse, Thenh Bo and his wife had a newborn son, John, who was named after my older brother. When afforded the opportunity, it is amazing just how disparate cultures can intertwine with one another and, as a result, become more enriched. As I understand it, Thenh Bo’s children became well educated and, eventually, pursued their vocation in medicine.

The legacy that Gov. Ray leaves for us is both vast and immeasurable. If not for his efforts, we would never have met the Bong family to appreciate their culture and fully understand the realization that we truly do live in a world that is a better place because of acts of kindness (and boldness) that began through Gov. Ray.

I’m quite sure there are countless ‘Thenh Bo’ stories throughout Iowa and beyond. Each one of them unique. We’re thankful to Gov. Ray and Thenh Bo (and his family) for teaching us that it is through compassion and understanding that we can “sit here in the middle of Iowa, in the land of plenty”…and provide the less fortunate a chance to live and contribute.

Now THAT is an impactful reach!

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